Classical inventory control, using an ex-ante optimization approach and tending to recommend large stockholdings, has been criticized over recent decades. As a result, just in time (JIT) based inventory systems, which exhibit sensitivity to customer requests (rather than production plans based on demand forecasts) are increasingly recommended. In such inventory control schemes, orders are made once the demand is revealed. As a result, ex-ante classical and ex-post JIT inventory schemes can be compared and analysed through: (a) the valuation and the management of demand uncertainty and (b) the time phasing of information and its relationship to the (inventory) control policy. The purpose of this paper is to elaborate and compare such approaches and devise an approach to inventory control based on regret decision making. Examples are used to show how we may be able to value flexibility explicitly in supplies and construct robust inventory policies which can respond to predictable and unpredictable demands (such as using options in inventory control and increased reactivity through JIT controls).
ASJC Scopus subject areas
- Strategy and Management
- Management Science and Operations Research
- Industrial and Manufacturing Engineering